John Quiggin

For quite some time, I’ve been saying that research effort into the economics of happiness would be better devoted to researching unhappiness. I’ve now presented this argument in the excellent online magazine Aeon, with the takeaway

So, perhaps we need a new research programme, to examine how unhappiness really works. Does hunger, or unemployment, or the loss of a family member to preventable illness make you a stronger and better person? Is striving after more and better possessions more fulfilling than satisfaction with what you have? It’s obvious from the way I’ve posed these questions what I believe the answer to be. But genuine research into the economics of unhappiness might yield some surprising answers to such questions as these, and reveal new questions that we have never before considered.

It’s time for another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.

There was a bit of a fuss on the US web late last year about whether solar panels should face south (that is, towards the path of the sun) or west (towards the setting sun). One point that emerged is that, while the electricity generated by west facing panels during the afternoon peak is more valuable, that isn’t reflected in the prices paid by consumers.

But thinking about the situation for new installations in Queensland, and particularly North Queensland, the case for facing west looks strong. The first thing to observe is that, in the tropics, the sun is in the south in summer and the north in winter, so there’s not a lot of benefit in choosing one or the other.

Second, Ergon now has a “time of use” tariff, to be used in conjunction with a “PeakSmart” airconditioner, which has a peak rate of 34c/kwh between 4 and 8 pm on weekdays. That’s almost as good as the 44c feed-in tariff that used to be on offer, and massively better than the 8c rate available to new installations. Even the shoulder rate of 24c is way above the feed-in tariff So, if you are installing panels, you really want to maximize your own consumption and minimise the amount fed back to the grid.

My first cut at a calculation suggests that, with this tariff, solar PV looks pretty good. Assume a cost of $2/watt installed, which is common for large systems, and suppose that, with the western orientation you get 1000 hours a year, equally divided between shoulder and peak. That is, each installed watt of capacity saves you 1 kwH/year, at around 30 c/kwh, for a 15 per cent rate of return. Even if you add back the 70c/watt or so saved by virtue of renewable energy credits, the return is still above 10 per cent.

Feel free to point out arithmetic or parameter errors here.

The Institute of Public Affairs has long been a major source of anti-science climate denial, following naturally from its earlier role as the leading denier of the health risks of passive smoking. While intellectually disreputable, this aspect of the IPA’s output seemed not to pose a problem for its broader role as an advocate of market-oriented economic policies. Indeed, given the frequency with which free-market economics and anti-science nonsense on all sorts of issues go together, the two seemed like a comfortable fit.

Over time, however, major corporations have become more wary of being linked to climate denialism, with the result that the IPA has become increasingly dependent on wealthy private donors like Gina Rinehart and Rupert Murdoch, whose definition of “free market” appears to be “lots of free stuff for Gina and Rupert”. In particular, Rinehart and her front group Australians for Northern Development are pushing the federal government to offer a tax holiday for Northern Australia, where most of her business interests are located. The IPA has delivered in full for Gina, including

* Joint work with ANDEV pushing the case for massive tax expenditures
* Prominently announcing that Ms Rinehart, arguably Australia’s greatest corporate welfare queen, had received a “2012 Visionary CEO Award”[1].

To get a feel for the kind of nonsense the IPA is now espousing, listen to this interview with the head of ANDEV on RN Bush Telegraph. It’s a display of rent-seeking that would have been considered brazen back in the days of ‘protection all round’. Particularly absurd, and offensive, is the suggestion that an income tax holiday designed to attract lots of (non-indigenous) workers to Northern Australia will somehow benefit the indigenous community.[2]

Of course, as long as Tony Abbott is in office, the fact that the IPA has lost all intellectual credibility won’t be a problem. But in the long run, the embrace of climate denial is exacting a high price for the IPA, as for US counterparts like Heartland.

fn1. I can’t find anything about this award on Google, except for an apparently unrelated gong given by a US outfit call qad.com. It appears to be an instance of the Montgomery Burns Award for Outstanding Achievement in the Field of Excellence, except that IIRC, Burns gave the award to Homer, not himself.
fn2. Compare Rinehart to Andrew Forrest, who at least makes efforts to employ indigenous people, and criticises Rinehart for not doing the same.

I’ll be on Radio National Bush Telegraph this Friday, talking about the proposals for massive tax expenditures on a “Northern Economic Zone” being pushed by Gina Rinehart, her lobby group Australians for Northern Development (ANDEV) and the Institute of Public Affairs, now heavily reliant on funding from wealthy individuals of whom Rinehart, directly and via ANDEV is the most prominent.

Back in 2000, the IPA was describing the Alice Springs to Darwin rail link, a heavily subsidised Public Private Partnership, as “the modern equivalent of the stupendously wasteful Ord River irrigation scheme“. This was one of the rare occasions on which I agreed with the IPA.

And it has historically been critical of deductions, rebates and other tax expenditures, correctly describing them as a disguised form of public spending
. Again I agree. It’s very rare to find a tax subsidy that achieves a public policy goal more cost-effectively than direct spending.

Having been exposed to Ms Rinehart’s persuasive mode of argument, the IPA has changed its tune, and plays a melody sweeter to her ears. It’s now fully on board with dams, tax subsidies to promote Northern development, and even special visa conditions on migrants, a policy that ought to be repugnant to libertarians of all kinds.

I’ll be interested to see how the IPA reconciles its former free-market line with its current position as advocate for yet more subsidies for someone who is arguably the world’s greatest welfare queen.

I’ve been working on a post about how to respond to commentators like Alan Jones and Andrew Bolt, and about the suggestion that they should simply be dismissed as clownish entertainers, to be ignored rather than criticised. But now that the Abbott government has turned into a clownshow (or maybe one of those medieval theatre restaurant shows) it’s hard to know what to do.

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The ABC News report on the government’s legislation to repeal section 18C of the Racial Discrimination Act, motivated by the Bolt case, makes interesting reading. Foreshadowing the legislation designed to prevent future cases of this kind, AG George Brandis notes that it defends “the right to be a bigot“.

Brandis didn’t draw the obvious implication, but he didn’t have to. Bolt has made a career out of pandering to the bigotry of his audience. As with others in the crowded field of rightwing journamalism, it’s not clear whether Bolt himself is a bigot, or whether he just plays one on the Internet, but the act is loud enough to please his ignorant and bigoted readers, and skilful enough to earn him plenty of friends among people who should know enough to be ashamed of themselves.

I don’t have a fixed view on the legislation in question, but my feeling is that racial bigotry should, at the least, be an aggravating factor in cases of individual defamation. If that rule were applied, the plaintiffs in the Bolt case would almost certainly have received substantial damages in individual defamation actions, given the findings that Bolt’s racially loaded claims about them were factually false and “not made reasonably and in good faith”.

Update I should have mentioned that “bigot” is a euphemism for the R-word, which our defenders of free speech insist must never be applied to anyone, with the exception of one person who is excluded here by virtue of Godwin’s Law.

It’s time for another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.

Salon has a couple of interesting articles about US millennials. Tim Donovan focuses on the plight of young people without college education who are suffering the combined effects of long-term growth in inequality and the scarring that comes from entering the worst labor market in at least a generation[^1]. Elias Isquith has a piece debunking Rand Paul’s prospects of pulling the millennial vote (I’ve seen a few of these lately, which may or may not mean anything), which includes the following observation

Despite the fact that a whopping 51 percent of millennials believe they’ll receive no Social Security benefits by the time they’re eligible, and despite the fact that 53 percent of millennials think government should focus spending on helping the young rather than the old, a remarkable 61 percent of young voters oppose cutting Social Security benefits in any way, full stop.

The idea that “Social security won’t be around long enough for me to collect it” is a hardy perennial, and thinking about it led me to the following observation:

It’s now possible for someone to have spent their entire working life believing that Social Security would not last long enough for them to receive it, and now to have retired and started collecting benefits. This belief has been prevalent at least since the early years of the Reagan Administration when it was pushed hard by David Stockman, and I’m going to date it to the first big “reform” of the system in 1977. Someone born in 1952, who entered the workforce in 1977 at the age of 25, would now be turning 62 and eligible to collect Social Security.
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It’s time for another weekend reflections, which makes space for longer than usual comments on any topic. Side discussions to sandpits, please.

A new sandpit for long side discussions, idees fixes and so on.

I have a post up at The National Interest, arguing that embargoes imposed by commodity export countries in pursuit of geopolitical objectives rarely, if ever, work. Opening paras:

At the beginning of the Civil War, the leaders of the South were, as is normal at the outset of war, confident that their superior military prowess would yield a rapid victory. But the Confederates had another reason for confidence: their possession of a near-monopoly in the market for the most important commodity of the day: cotton.

Like oil in the twentieth century, cotton was vital to the industrial economies of the nineteenth, and particularly that of Britain, the preeminent naval and military power of the day. And the Southern United States was the world’s dominant producer of cotton, accounting for 77 percent of British imports in the 1850s.

Rhetoric about ‘King Cotton’ matched the most hyperbolic claims about ‘energy superpowers’ to be heard today. In 1858, South Carolina senator James Hammond said ‘old England would topple headlong and carry the whole civilized world with her…. No, you dare not make war on cotton. No power on earth dares to make war upon it. Cotton is king.’

The most immediate application, obviously, is to Russia and gas. Feel free to discuss the broader issues raised by the Ukraine crisis.

A day late but it’s time for another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.

I was invited to speak at last Sunday’s March in March, but was unable to go as I was entered in a triathlon in Mooloolaba[1]. So I wrote a statement to be read at the meeting, which was then published in in Independent Australia[2]. It’s over the fold.

After I wrote this statement, there was a bit of discussion in comments here as to whether the March was a party-political event in support of the ALP. I have no information about the organizers, but they were certainly happy to take a statement critical of both major parties

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I’ve been too busy to post much, but I’ve written a number of articles over the past month or so that might be interesting to readers here. This one, published by various Fairfax papers looks at the damp squib of the G20 finance ministers meeting, and links it to the Abbott government’s elevation of tribalism over good government, and even over market liberal ideology.

There’s a follow-up here from Charles Richardson at Crikey and something more on similar lines by Rob Burgess at the Business Spectator

It’s time for another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.

This is a contribution to a discussion of Sen’s capability approach, taking place at Crooked Timber. It’s a bit too wonkish for the CT readership, it seems, and maybe the same here, but I’ll toss it up anyway.

Most of the discussion of capabilities has concerned poor/developing countries. Moreover, most of it has been qualitative rather than quantitative. One consequence is that, although the idea of capabilities has been around for a while now, its impact on the policy process in developed countries has been modest at best.

My own work on capabilities, represented by an article[1] published last year in the Journal of Health Economics has also had a modest impact, but for very different reasons. While not strictly quantitative, it’s mathematical, more so than the average reader of JHE tends to be comfortable with, and its direct relevance to policy is limited by the fact that we are, at least to start with, not addressing distributional issues.

The main objective is to explore the idea that capabilities can provide a basis for allocating health care resources based on the QALY (Quality-Adjusted Life Year) measure. in previous work, we looked at the “welfarist” idea that policy should be based on maximizing lifetime expected utility. It turns out that, considered purely as a technical problem, this can’t be done, except in very special cases. The appeal of capabilities is that they provide a non-welfarist (or at least ‘extra-welfarist’ in that it is more than a simple expected utility maximization) rationale for policies involving scarce resources like health care.

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Following a similar announcement last week by Lend Lease, and earlier announcements by BHP Billiton annd Rio Tinto, mining company Anglo American has withdrawn its proposal to take part in the expansion of the Abbot Point coal terminal. That leaves only two proposals, both from Indian companies owned by billionaire entrepreneurs reminiscent of Bond, Skase and other Australian heroes of the 1980s. Both Adani and GVK are heavily indebted conglomerates of the type that invariably emerge when money is cheap, and mostly collapse when the tap is turned off.

It’s not surprising that these companies have not yet abandoned their bids. Doing so would involve booking huge losses on their mining prospects in the Galilee Basin. But, it’s hard to believe anyone is going to lend them the billions required, not just for the port expansion, but for a 500km rail line and the mine itself. The price of coal is well below the level required to cover the costs of extraction and transport, let alone to provide a return on capital. And if Adani and GKV don’t build the rail lines, the development of the entire Basin will grind to a halt.

The end of the Abbot Point expansion and the proposals to mine the Galilee Basin would be a huge win for the Barrier Reef and the entire planet. The port expansion will involve the dredging of millions of tonnes of waste, to be dumped in the Great Barrier Reef Marine Park. But far more dangerous is the Galilee Basin itself, containing at least 25 billion tonnes of coal. That would produce around 50 times as much CO2 as Australia currently generates every year.

And, unsurprisingly, both Gina Rinehart and Clive Palmer hold big stakes (though Rinehart wisely offloaded much of hers). So, as well as saving the Reef and the planet from some imminent threats, the abandonment of the Abbot port expansion and rail line will clip the wings of some very unappealing billionaires. Here’s hoping.

Former Queensland Transport Minister Rachel Nolan (whose argument for privatisation I discussed here) has a piece in the Brisbane Times attacking the Electrical Trades Union (disclosure: I produced a report on electricity privatisation for the Victorian branch of the union). The headline is “The ETU is nobody’s friend“, and that pretty much sums up the article – Nolan’s complaint is that the ETU has had the temerity to attack both the previous Labor government and the current LNP government over the same issues, broken promises and support for asset sales.

As Nolan admits, Labor suffered from a

a widely perceived breach of trust – the fact that Labor went to the 2009 election on a slogan of “Jobs, not cuts” and then announced a program of asset sales seemingly as soon as the result was declared

With the exception of the weasel words “widely perceived” and “seemingly”, this is spot on. And the voters reacted long before the ETU had a chance to mount a campaign. Labor’s support plummeted in the polls and, with the exception of a brief blip after the 2011 floods, never recovered.

Now, Nolan complains, the ETU is doing the same thing to the LNP government whose victory they assisted by campaigning against the asset sales. Why? Well,

LNP members’ willingness to stand by the ETU[1], hands on hearts telling us they didn’t believe in Labor’s asset sales, is an act of breathtaking hypocrisy – perhaps bettered only by the pre-election reassurances they gave public servants – with which they now have to live.

So, the crime of the ETU is not to criticise asset sales or dishonesty. It would be fine, according to Nolan, if they made these criticisms of one side (preferably the LNP) and ignored similar actions by the other. But to attack both sides indiscriminately is to undermine the very foundations of the two-party system.

All of this makes sense in Nolan’s world view. As she says in her Monthly article “ Australians have little philosophical grasp of the (rightful) diminution of governmental power which deregulation has brought”. Hence, it is necessary for the two major political parties to lie at election time, in order to secure office and implement the policies on which they both agree. A good friend, in Nolan’s world is a person who picks one of the interchangeable teams, and sticks to it.

And finally, there’s this little gem where Nolan (Ipswich Girls Grammar and UQ alumna) makes clear her contempt for ordinary workers, and for hard-won working conditions, abundantly clear

It might be fun for the bruvvers to chant on their RDO before heading off for a few beers but most people aren’t just troglodytes who are opposed to everything – they do not share the distorted world view of the ETU.

Perhaps if she rechecked the results of the last election, she might conclude that “most people” with whom she mixes are not a particularly representative sample of the Queensland public, and that the “bruvvers” are actually a bit closer.

fn1. As far as I can tell, the claim of “standing by the ETU” is bogus. To the best of my knowledge, the ETU never gave the LNP any support or expressed any faith in their promises. But, thanks to the two-party system, attacking one party is seen as equivalent to supporting the other.

fn2. Thanks for alerts on this from my wife Nancy and from commenter Megan.

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In the latest issue of Gerard Henderson’s Sydney Institute Quarterly, Adam Creighton, economics correspondent at the Oz, “explains why most Australians pay no net tax”. That’s a striking conclusion, so I checked it out. Creighton has discovered that most Australians get about as much back in transfer payments and public services as they pay in taxation. The poor get a bit more, and the rich a bit less.

To save Creighton some work in future, can I suggest he consider the budget identity constraint “Expenditure = Income”. Since the government spends on services and transfer payments roughly the same amount as it raises in tax revenue[1], it’s obvious that, for the average Australian the same identity must hold, with income renamed as “tax paid” and expenditure as “transfer payments and public services”.

Next up: Why there is no net travel into the CBD

fn1. Taking account of the seignorage from inflation, returns on assets, intertemporal transfers through debt etc, this rough equality becomes an identity. Please, no arguments about deficits, and especially about MMT. The point of this post is a really simple, and doesn’t need this kind of complication.

Andrew Bolt (no link) has repeated the lie that I drastically overestimated the impact of a carbon tax on global warming. In fact, it was Bolt who was out by a factor of 100 (Full details here). Rather than rehash this dispute, I’d thought I’d list some of Bolt’s greatest hits, or rather misses.

* Here he is, confusing the stratosphere and the troposphere, and claiming to have disproved climate science as a result

* Here, being fooled by a David Rose claim so absurd that even the Mail on Sunday had to retract it

* Here, denying the fact that Arctic ice is disappearing fast, a fact that is now regularly proved by sailing through the previously impassable Northwest Passage, and by the intense international negotiations about sovereignty over the newly opened waterways

* Here, claiming the carbon tax would be “ruinous”

* Here, claiming that radioactivity is good for you

* Here, unable to understand the meaning of the word “average”

* Here, defaming the Bureau of Meteorology, and lying about it

* Here, being fooled by a LaRouchite conspiracy theory on DDT

That’s just from my blog and just for the last five years. I haven’t even got to the Iraq war, where he combined credulous faith in repeated announcements of victory with vicious denunciations of all who predicted, correctly, that the war would be disaster, and documented that disaster as it unfolded.

Anyone who believes anything Bolt says is a fool. But I suspect that, like Bolt himself, most of his fans know he is talking nonsense and don’t care. He’s a tribal ally, and he’s good with snark and slander, and that’s good enough for them.

I’ve had a few responses to my recent report on the history of electricity privatisation and market reform in Australia. There’s one here from Lynnette Molyneux, who’s with another research group in my own school, and one from the Electricity Supply Association (doesn’t seem to be online, I’ll post a link shortly). Most interestingly, one from Sinclair Davidson at Catallaxy[1] who starts with a couple of points of agreement.

A couple of thing where we agree:

Economists, at least when they were thinking clearly and speaking honestly, were as one in rejecting the most popular political reasons for privatisation: as source of cash for governments or a way of financing desired public investments without incurring public debt.

I made a similar argument recently in New Zealand.

Then he is critical of Public-Private Partnerships. I am too – albeit for different reasons. All too often, I suspect, they are financing mechanisms looking for infrastructure to finance, as opposed to being a positive NPV infrastructure project looking for financing.

before going on to quibbles and more substantive criticism.

I’ll try to present a proper rejoinder to the criticisms later, but for now I want to observe the striking fact that the point on which Davidson and I, and (AFAICT) all Australian economists, agree is also the focus of agreement between Campbell Newman and his predecessor, Anna Bligh, along with Peter Costello, Barry O’Farrell, and the great majority of Australian politicians[2]. The only problem is that the politicians agree on a view exactly opposite to that of the economists

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The announcement that Lend Lease is pulling out of a joint venture bid with Aurizon (the former Queensland Rail freight arm) to participate in the expansion of the Abbot Point coal terminal comes shortly after the Great Barrier Reef Marine Park Authority has approved a proposal to dump dredge spoil from the Abbot Point coal terminal expansion in the marine park area. (The government’s go-to guy for “independent” ethical clearances, Robert Cornall[1], assures us that there were no conflicts of interest arising from the presence of coal companies executives and employees on the Board. Then he had to rush off to whitewash investigate the conduct of the government and its agents on Manus Island).

On normal commercial calculations, this decision ought to have made the project more appealing. But the Lend Lease statement withdrawing from the project included the slightly gnomic observation that “Lend Lease remained committed to applying “rigorous due diligence” and considering the environmental impacts of all it projects,” it’s reasonable to infer that the decision made the project more toxic rather than less. The obvious reasons
* Coal projects are attracting more and more opposition, but it’s always possible for the proponents of one project to say that if theirs didn’t go ahead, another, possibly worse one, would. By contrast, when a government that’s busy revoking World Heritage Status announces that the project will involve dumping waste in a sensitive marine park, any company that cares about its public image is going to run a mile
* Given the obvious PR costs, the fact that the proponents went for this, rather than looking for a more expensive but less politically toxic approach to waste disposal suggests that the project is economically marginal, an inference supported by the earlier abandoment of a more ambitious version involving Rio Tinto and BHP.

An obvious follow-on project is: who is financing these projects. It looks as if all the major Australian banks are involved to some extent. Westpac is already running into trouble in New Zealand for financing coal mines in sensitive areas. As major international banks, particularly development banks, start dumping toxic projects like this, the Oz banks are likely to find themselves with a lot of undiversifiable risk.

”

fn1. Breaking usual protocols, I’ve linked to the Oz. When the Murdoch press calls someons a “Howard defender” and strongly implies that he’s stooge, I think it’s safe to say that the appearance of independence is compromised.

Telstra is lining up behind Qantas for the removal of restrictions on foreign ownership. It’s worth mention that these annoying “restrictions” were marketed to the public as “safeguards” when these enterprises were privatised in the 1990s. As I said at the time

Based on past experience, it seems unlikely that restrictions on foreign ownership will ultimately be effective. The effect of the ‘safeguards’ in the Telstra (Dilution of Ownership) Bill will be to reduce the sale price obtained by taxpayers while obscuring the fact that the ultimate outcome of privatisation will probably be either a foreign-controlled monopoly in telecommunications or a duopoly consisting of two foreign-owned firms.

Current and recent proposals for the sale of state-owned electricity assets have been pushed with safeguards of this kind, which achieve nothing. If it’s OK to privatise a business, it’s OK, and indeed obligatory, to sell it to the highest bidder. For obvious reasons, this will usually a foreign multinational in the same line of business.

It is surely not without just reproach, that a nation, of which the commerce is hourly extending, and the wealth encreasing, denies any participation of its prosperity to its literary societies; and while its merchants or its nobles are raising palaces, suffers its universities to moulder into dust.

A JOURNEY TO THE WESTERN ISLANDS OF SCOTLAND by Samuel Johnson
(ST. ANDREWS)